B2B Payments

Regulation, Corporate Demands Force Banks To Hustle


Know Your Customer regulations can mean corporations have to wait as long as three months — yes, months — to get onboarded to a new bank. Part of the problem, says Pegasystems Senior Director of Risk, Compliance and Onboarding for Financial Services Reetu Khosla, is that KYC and other regulations change so frequently and are so numerous that it’s a major undertaking to remain compliant.

But the world is accelerating, so with businesses demanding speed in their business operations and financial services, top financial institutions need to hustle — without stepping out of line with regulations.

“It’s really about the competitive advantage and time to transaction, plus auditability and consistency,” Khosla said of banks’ need to onboard corporate clients quickly, while remaining compliant — one of the largest pain points, she added, for financial institutions.

Globalization creates an added layer of complexity for banks today; while corporates expect to be able to transact across borders as soon as they’re onboarded to a bank, FIs are tasked with adhering to the rules of multiple jurisdictions.

“When we look at where the market is moving, clients expect to transact globally and to trade globally, to have a cash management account in Hong Kong and an FX trading accounting the U.K. and U.S.,” Khosla said. “They don’t understand why you’re asking for the all the same due diligence and going through the 120-day process of onboarding when you’ve already been onboarded in those jurisdictions.”

Typically, the process to ensure a corporation and all of its business partners, subsidiaries and the like are properly onboarded means manually going through each jurisdiction in which the corporation does business to ensure proper compliance on a country-by-country basis. It involves a lot of paperwork and a lot of time, Khosla said, adding that it’s a “totally siloed” process for FIs.

Earlier this month, Pegasystems took this challenge to task with new enhancements to Pega KYC and Pega Client Lifecycle Management, enabling banks to gain a bird’s eye view of their corporate clients, from onboarding to offboarding. Part of the enhancements include new partnerships with data service providers, like Dunn & Bradstreet, Thomson Reuters and OutsideIQ.

On Tuesday (Sept. 20), OutsideIQ offered additional details about its partnership with Pega, explaining that it will use its artificial intelligence technology to manage corporate risk profiles as part of banks’ compliance and due diligence efforts.

According to Khosla, normally, banks in each jurisdiction would have to aggregate documents and information about their clients manually.

“You can imagine how many days it would take just to collect that documentation,” she said. Data technology, however, enables FIs to do so in an automated fashion and streamline a corporate profile across borders. Again, it’s not just about remaining compliant (although that is paramount), but Khosla added that this gives banks a competitive edge by being able to onboard corporations much faster than before.

And speed is critical.

Multinational corporations need to be able to do business globally and quickly, and with faster payments initiatives on the way, their transaction speeds are also going to accelerate. While banks will use faster and real-time payment technology to maintain their competitive edge, the technology to mitigate risk and ensure security of these faster transactions needs to also keep up.

Khosla said she believes that’s where banking technology is headed.

“Around something like faster payments, you need something that’s industrial strength, that’s going to scale globally, that has prebuilt functionality,” she said of the emergence of RegTech — regulation technology. New solutions need to be able to identify and dispose of transactions that have triggered a screening alert within a bank, she explained.

“It’s not only about risk, like fraud or sanctions risk, but it’s also about streamlining your business,” the executive continued. “You want to ensure faster payments, even though you may have an alert. You want to prioritize the $100 million transaction coming through to clear a trade, while still mitigating risk.”

Speed and regulation rarely go hand-in-hand. But as corporations globalize, so do the regulators, said Khosla, meaning rules are evolving as more streamlined as regulators across borders communicate. Be it faster onboarding or faster payments, financial institutions have to keep up with corporates’ global demands, but that doesn’t’ mean compliance can go by the wayside.

“Regulations aren’t going away,” stated Khosla. “I think we’re going to see more enforcement. I think it’s really about making it efficient, not only from a client-centric perspective but from a cost and efficiency perspective. It’s about competitive advantage and mitigating risk.”



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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